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Old shows on Hulu Plus for $10 a month could be a price no one wants to pay

Get ready for Hulu Plus. According to The LA Times, Hulu will soon roll out its subscription service, with additional content for paid subscribers in the form of extra episodes of shows that are now available on the site.

Hulu is smart to leave the current content on the site available for free. But is the site providing the right kind of freemium content with this plan? Asking consumers to pay $120 a year for old episodes of free shows looks pretty steep. And it still could fall short of revenue targets needed for Hulu to survive.

The subscription plan could go into effect as soon as May 24. The LA Times writes:

"Under the proposal, Hulu would continue to provide for free the five
most recent episodes of shows like Fox's "Glee," "ABC's "Lost" or NBC's
"Saturday Night Live." But viewers who want to see additional episodes
would pay $9.95 a month to access a more comprehensive selection,
called Hulu Plus."

There are lots of people who want to watch old episodes of their favorite shows. But there are already places to do that for less than $120 a year. And a site like Netflix currently offers access to old series instantly.

If Hulu can convince the networks to consistently give it premium access to content, charging a monthly fee could work. But already, there are problems. For instance, ABC has released a popular iPad app that airs that channel's shows for free.

As Apple's iTunes Store has shown, consumers are proving more interested in paying for specific pieces of video and audio content when they want it online. Furthermore, putting all of its content under one umbrella could prove expensive for Hulu, even at a cost $10 a month.

"Hulu will need to pay out something like $3 to $5.50 off the top for
every $10 it brings in. And then it has to shoulder the streaming
costs, billing costs, customer service costs, etc.–figure a couple
bucks a month more for that stuff. That gets you something like a 30
percent gross margin, which is nothing to brag about."

As Hulu adds content to its site, it will be hard to increase the $10 monthly fee. But if the site doesn't do so, new content will eat into its earnings. Kafka suggests implementing a windowing strategy that gives subscribers on the site access to content earlier than Hulu freeloaders. But that could turn away users if it means changing the current access model.

Another option could be bundling specific channel content together for different fees. This is something that digital video provider Boxee has been playing with. As Boxee founder Avner Ronen says on his site's blog:

"Internet video does not mean everything will go a-la-carte. It is up
to the content owner to decide how to package and market their content.
For some, a-la-carte may work, for others it may be a terrible idea. I
believe the Internet will open the door for new and creative ways to
bundle and package content.

The question of whether a-la-carte works or not for content owners
is a matter of pricing and rights. If a season pass for the NBA costs
$169 then maybe $9.99 to watch a single game works for both consumers
and the NBA?

For Hulu, offering specific access to pieces of content could be a great way to even out its revenues and costs. There's no way around the fact that some of its videos are more popular than others. But right now, the site is having trouble making the case to networks that it should be the premiere location for their videos. (For instance, Comedy Central recently pulled The Colbert Report from the site, which had been one of Hulu's most popular shows.)

If Hulu can break up its content into different packages for different access, it could win over subscribers in all sorts of demographics. Convincing the networks of a plan like that is another story, however.

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